Realisation: The Hours That Were Paid For
The companion measure. Utilisation counts hours offered, realisation counts hours paid for, and only their product is about money.
The companion figure, for the same population and the same quarter
88.7%
Numerator: Value invoiced to clients in the quarter
Denominator: Value of recorded hours at standard rates
Write-offs coded by reason: overrun, quality, negotiation, goodwill, fee cap.
Utilisation on the same population was 81.6%, so 72.4% of available hours converted into invoiced value. That product is the figure a firm's health depends on, and almost nobody reports it. One firm's own quarter, not a benchmark.
Realisation is the share of recorded value that becomes invoiced value, or invoiced value that becomes collected value. Utilisation counts hours booked; realisation counts what those hours were worth.
The data-quality issue in “Realisation: The Hours That Were Paid For” begins at the moment an hour is recorded or reconstructed. For organisations researching employee monitoring for performance reviews, using employee monitoring for performance reviews without distorting the metric can organise project-linked time entries, provided people can see, explain and correct their records before those entries affect billing or management decisions.
Either one alone describes half a transaction, and the half each describes is the half the other omits.
The assumptions behind “Realisation: The Hours That Were Paid For” can also be tested against Grants.gov policy resources. Record which recommendations apply to the real workflow and which do not.
The definition
Invoiced value divided by recorded value at standard rates, for a period and a population. Some firms use collected rather than invoiced, which is stricter and slower.
Like utilisation, it has definitional variants, and the same discipline about writing them down applies.
Why it is the companion
Utilisation tells you how much of your capacity went to client work. Realisation tells you how much of that work was paid for.
The product is the share of capacity that became revenue, which is the figure a firm's health actually depends on.
The product, worked through
Eighty per cent utilisation at ninety per cent realisation is 72 per cent of capacity converted. Ninety-four at sixty-two is 58.
The second firm has the better-looking dashboard and the worse position, by fourteen points of capacity.
Why firms report one and not the other
Timing and ownership. Utilisation is current and belongs to operations; realisation is lagging and belongs to finance.
The lag is one to two quarters, which makes the two awkward to put on one page and is not a reason not to.
The honest presentation
Utilisation for the current month, realisation on a rolling quarter, labelled as lagging, with the product calculated from both.
The label is what makes it usable. An unlabelled mix of current and lagging figures is worse than either alone.
What realisation reveals
Pricing problems, scoping problems, quality problems and over-generous goodwill. Four causes, distinguishable if write-offs are coded by reason.
Utilisation can see none of them, which is why a firm with a utilisation-only dashboard diagnoses all four as delivery issues.
Coding write-offs by reason
Overrun. Quality. Client negotiation. Relationship goodwill. Fee cap.
Five codes, applied at the point the reduction is approved. It takes seconds and it converts a single percentage into a diagnosis.
Where realisation misleads on its own
A firm can hold realisation high by declining difficult work and discounting nothing, while utilisation collapses.
High realisation on very few hours is not health, which is the mirror of the utilisation problem and the reason both are needed.
The two-by-two
High on both: healthy. High utilisation, low realisation: busy and underpaid, the commonest troubled state. Low utilisation, high realisation: underfed but well priced. Low on both: in difficulty.
Four states, each calling for a different response, and a utilisation-only report cannot tell them apart.
What to target, if anything
Neither, individually. The product, at firm or team level, as a reported figure rather than a threshold.
It resists the individual responses in the behaviour section, because no single person's recording moves it much.
The arithmetic of the two-by-two
Four firms, each with 10,000 available hours. The first: 80 per cent utilisation, 90 realisation, 7,200 hours' worth of value invoiced. The second: 94 and 62, giving 5,828. The third: 62 and 96, giving 5,952. The fourth: 64 and 68, giving 4,352.
The second firm has the best utilisation figure in the group and the third-best conversion. On a utilisation-only dashboard it is the leader by a wide margin.
One multiplication reorders the whole group.
Where the lag actually matters
In a quarter when something changed. A new pricing policy, a large engagement, a change in the client mix.
Current utilisation beside last quarter's realisation will describe the new situation and the old one simultaneously, and the product will be wrong in a direction nobody can predict.
The remedy is the label and the discipline of not computing a product across mismatched periods when something material changed. In stable periods the mismatch is immaterial and the product is reliable, which is most of the time — but the periods when it is not are exactly the periods a firm most wants the number.
The first quarter it is reported
Expect the product to be lower than anybody's intuition, because intuition is anchored on the utilisation figure alone.
A firm used to reporting eighty per cent and discovering a converted figure of seventy will treat the drop as bad news. It is the same position described more completely.
Labelling it as a fuller measurement rather than a deterioration is the whole of the communication problem, and it is one sentence.
The practical first step
Put the two numbers on the same line for one quarter and calculate the product. One row in a spreadsheet.
Most firms that do this find the product has been falling while the utilisation line rose, and that is usually the most useful thing the measure has told them in years.